First published Sat Sep 5 for members: Years ago, I was a passenger on the most beautiful and elegant gold ship you have ever seen. It was equipped with every luxury known to man, and was the most stylish ship afloat. I was honored to be a passenger on this ship.

However, after being on this ship for some time, I found a leak. I went around to all the other passengers, and tried to warn them that the ship was going down, as the leak was going to sink the ship. But, to my surprise, all they did was laugh at me. After trying to convince them to come see the leak, they simply refused to even look. They all said to me that gold does not sink. So, I had no choice. I ran to a life boat, lowered it to the sea on my own, and began rowing.

After rowing for quite some time, I noticed that the boat was slowing sinking into the ocean. But, most on board still viewed the gold ship as unsinkable. They continually said to themselves “there is no way this gold ship is going to sink.” Even as the water was overtaking the main deck of the ship, they were still confident that gold simply would not sink.

By the time most of the ship was already under water, the remaining life boats were completely useless, as they were now also under water. So, those that were able to swim began swimming towards my life boat, which, to this point, only had one passenger – me.

But, as more and more reached my life boat, they began to overwhelm my life boat, and the life boat began to take on water. Now, it seems that the bearish life boat is taking on water, as it is becoming quite overloaded. This is now the point at which we are in the metals market.

Even those that are considered uber-bullish of metals have seriously toned down their rhetoric. As an example, Gloom, Boom and Doom editor, Marc Faber, may not even be looking higher anymore in the metals and mining world. Rather, in a recent interview with Bloomberg, he noted that “I would buy mining stocks, I’m not saying they’ll go up, but I think they will go down less.” Not exactly a resounding endorsement, is it?

Again, I will reiterate what I have been saying for weeks, and it seems Mr. Faber’s perspective is now in line with what I expected as we approach the lows:

You see, at the market highs, everyone was convinced that higher levels would be seen, yet the market continued to move lower in the face of such optimism. But, now, as we have dropped lower and lower in this 4 year correction, less and less are going to believe that a bottom has been struck, as most will believe that even lower levels will be seen. And by the time the bottom is actually struck, most will think that any rally will only lead to lower lows. This is that type of market sentiment which will leave most behind once the final bottom has been struck, and then make them chase the market much higher.

For years, I have been noting that my ideal target in the GLD was the 98 region. That is in line with a level which is just over the $1,000 level in gold. I also noted years ago we could see an overreaction to the downside which could take gold as low as $700. But, as the boat has been filling with many bears, I am questioning the likelihood of being able to break the $1,000 level. Yet, we will not know until we see how the next downside structure takes shape.

As far as the current structure in the GLD, we will need to break the 107 level, which will open the door back down to the 103-105 region. That would likely be the bottom of the (a) wave of the final 5th wave. And, as I have been saying for the last two weeks, the main region of resistance in the GLD is the 110-111 region. Should we move through that region, then it suggests we can rally as high as the 116-118 region, which could delay the final bottom in the metals until next year. Again, it seems that too many bears have moved into this market, and the final lows have continually been pushed off when the market has turned too bearish.

As far as the GDX, I am still looking for the 4th wave rally to take hold. This past week, I was questioning whether wave v of 3 had completed, and the decline we experienced this past week seems to best count as an ending diagonal which completed wave v of 3 in a truncated manner. Should we see a rally begin in the upcoming week, my expectation is that it will be a 4th wave rally back towards the 16 region which can take several weeks to a month.

This past week, I have been asked what the turn off the bottom would look like in the metals. So, I am zooming out on my silver chart this week to provide a visual as to how I see the bottom being struck. We have recently hit the top of my “BUY, BUY, BUY” box, which has been on the chart for several years. We will know that the bottom has been struck when we see a strong rally take hold back towards the low 20 region in 5 waves. That would be my signal that the bottom is in, and all pullbacks can be bought for the resumption of the bull market. Based upon my expectations, it may take us until 2017 until we see the 30’s in silver again, so you still likely have time to load up before the market will double from where we currently reside.

If you want to learn how we use sentiment to track the metals market, feel free to join us for a free trial at Elliottwavetrader.net.

And, to answer all the questions we have been receiving of late from readers, our new Mining Stocks Portfolio & Coverage List is finally being launched on September 15th, and will feature a model portfolio on mining stocks. The portfolio, with entry and exit alerts, aims to outperform the GDX. The service will also include our Coverage List of charts and analysis on the wider universe of mining stocks.

StockWaves members at Elliottwavetrader.net will receive access to the service at no additional cost -- so long as they've joined StockWaves before the launch. Those joining Stock Waves after the launch will pay an additional $49.95/month to access the Mining Stocks Portfolio & Coverage List.

Also, since March, one of our resident “nerds,” Larry White, has been trading the triple-leverage mining ETFs in his Short-Term Trade Alerts service within StockWaves. The total return of his day & swing alerts, focused on the JNUG and JDST, now exceeds 132%. Currently, Larry’s service is just $49.95/month added on to the base cost of StockWaves, but the service will be raising rates to $79.95 for those adding it on or after October 1, as we prepare for the resumption of the bull market in metals.

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